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Budgeting has gotten a bad connotation these days and not justly so. It is a very useful tool that helps us to track our money and not over spend and get into debt (again). This does not mean that we have to live unhappy and restrictive lives because we have a budget. The key is to make sure to budget for happiness.

How do you budget for happiness?

Simple! You have to make sure that your budget includes money (and time) for things that you actually enjoy. I will use myself as an example. My two favorite things to do are travel and try and find really good and affordable restaurants. I have categories for each in my budget. I set aside a set amount for my travel fund as well as eating out each month. A little can go a long way here.

First and foremost you must have all of your life essentials covered. After that you should not feel like you have to save every dime over the essentials for retirement or other goals. Being able to retire and enjoy life later is important but it is also important to enjoy life now as well. If we don't take time to enjoy ourselves now as well as later then why bother?

In my own example I budget $100 per month for eating out and on average $50 for travel funds. I use miles to get my tickets so I don't need to save as much for travel. This represents a very small portion of my budget currently as I am also paying down my debt. Even with debt I feel it is important to do something I enjoy in order to stay sane and not get discouraged. Any good budget will have built in motivators to help you stick to it.

There is no "correct amount" to set for doing things that make you happy. The best formula is to: pay your essential bills first, then save the correct amount for retirement, then budget for things that are fun, and finally save anything else left over. My only exception to this "rule" is that you need to have an adequate emergency fund before doing fun stuff. It is simply too important! Following this formula will ensure success and happiness over the long term.